When luxury gets everywhere

The relationship between quality of service and the luxury touch is often noticed, but its significance is rarely understood. A recent Booz Allen Hamilton study suggests that with luxury brands, the excellence of the underlying product is merely a starting point. Interviews with 40 executives at a broad spectrum of high-performing luxury brand companies confirm that what makes these luxury products truly stand apart is the superb level of service in which they are wrapped. Indeed, the services surrounding each of these brands can be viewed not only as an intrinsic part of the products themselves, but also as an important differentiator of the brand.

Companies like Ritz-Carlton, Nordstrom, and Lexus can guarantee service that goes the extra mile because, in effect, they’ve programmed their organizations to foster customer-centered behavior in employees at all levels. Although there’s no single process for achieving high levels of customer satisfaction, four principles are common to nearly all top-performing luxury brand companies:

1. They create a customer-centered culture that identifies, nurtures, and reinforces service as a primary value.

2. They use a rigorous selection process to populate the organization with superior sales and support staff. The impulse to care about accommodating customers cannot be taught to people who are not predisposed to it.

3. They constantly retrain employees to perpetuate organizational values and to help them attain greater mastery of products and procedures.

4. They systematically measure and reward customer-centric behavior and excellence in sales and service to enforce high standards and reinforce expectations.

“When these four principles are at work, the result is a highly integrated business model that combines a superior product line with outstanding sales and service quality, driving strong growth and profitability in the process,” said Gabriel Chahine, Booz Allen Hamilton, a global management consulting firm with offices throughout the MENA region.

Over the past five years, for example, Ritz-Carlton sales have grown at a rate of 12.7 percent per annum, compared with a rate of 1.8 percent for the rest of the luxury hotel industry. Nordstrom’s U.S. sales have grown at a rate of 8.3 percent, while sales for other non-discount department stores have declined 1.6 percent. And Lexus sales have grown by 7.8 percent, compared with just 0.9 percent for other luxury auto brands.

Values First

Added Chahine, “Companies that achieve high levels of customer satisfaction display a zeal for superior service from the very top of the organization chart. This dedication constitutes the foundation of customer-centricity. Without the values and culture that leaders inspire, none of the other principles can be effective for long.”

Customer-centric values and culture inform the hiring process and animate the systems of training and rewards. Instilling values of this sort may be the ultimate test of leadership. Leaders of customer-centric companies clearly articulate what kind of organizational culture they want and consistently sell employees on its key principles, leaving no doubt about the significance that members of senior management attach to customer-centricity.

Ritz employees are constantly schooled in company lore and company values, spelled out in a credo that the company calls its “Gold Standards,” printed on a card that employees carry at all times. The credo begins with the statement, “We are ladies and gentlemen serving ladies and gentlemen,” and continues with principles such as these: